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Notice I-03-03

April 22, 2003

Department of Homeland Security warns FCMs about fraudulent check use

The United States Department of Homeland Security (DHS) has requested that NFA alert FCMs about an on-going scam. The DHS' Office of Investigations, New York Field Office, is conducting an investigation into the use of counterfeit/fictitious "Bank" and "Cashier" checks to open online trading accounts.

One particular organization typically mails a check, a downloaded application containing the fictitious/stolen identity, and two forms of altered identification, after establishing the online relationship. This may involve speaking with a broker by telephone. The victimized firms then deposit the check because it is believed to be official. Before the fictitious checks are rejected by the banks, the organization will trade. If the trading results in a profit, they ask the firm to wire funds to an account held at a foreign bank. The organization will also ask the firm to wire recently deposited funds from the fictitious check to the above-mentioned accounts, because they may have "over extended themselves".

Although DHS’ current request relates to incidents of fraudulent activity in the securities industry, NFA sent an Advisory to FCMs last September due to similar activity in the futures industry. That Advisory reminded FCMs to always verify funds or require checks to clear before allowing withdrawals (Notice 1-02-19).

If you have any information about this type of activity, please immediately notify DHS Special Agent Erik Rosenblatt at (646) 230-3253.

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